Add insight and a question to classmate's discussion below Gross Margin Ratio: This ratio measures...
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Gross Margin Ratio: This ratio measures the percentage of each dollar of sales that the company keeps as gross profit. Carnevale Winery's gross margin ratio for the most recent year was 63.6%. This means that for every dollar of sales, the company kept 63.6 cents as gross profit.
Operating Expense Ratio: This ratio measures the percentage of each dollar of sales that the company spends on operating expenses. Carnevale Winery's operating expense ratio for the most recent year was 36.4%. This means that for every dollar of sales, the company spent 36.4 cents on operating expenses.
Net Profit Margin Ratio: This ratio measures the percentage of each dollar of sales that the company keeps as net profit. Carnevale Winery's net profit margin ratio for the most recent year was 27.2%. This means that for every dollar of sales, the company kept 27.2 cents as net profit.
One potential reason for the decline in net profit margin is that the company's operating expenses increased at a faster rate than sales. This would cause the operating expense ratio to increase, which would in turn cause the net profit margin to decline.
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